Patients in the Dark on Medical Costs, Study Finds

Jupiterimages/Thinkstock(SAN FRANCISCO) -- A new study has put a spotlight on the astonishing disparities in what Americans pay for health care. For example, an uncomplicated surgery to have the appendix removed could cost much more than you might think.

The vast difference in costs among hospitals for similar procedures was the focus of a new study by researchers at the University of California at San Francisco, whose findings were published Monday in the journal Archives of Internal Medicine. After reviewing charges from more than 19,000 patients, the researchers found that the cost for treatment of uncomplicated appendicitis ranged from $1,529 to a whopping $182,955. To put this in perspective, the price of a new Maserati is $130,000.

Health care transparency has been a topic of great debate. In a country where most of price-setting for other products is influenced by consumers, many experts said when it came to health care, U.S. consumers had no power. This, they said, was because they lacked fundamental knowledge necessary in a free-market economy -- the cost of the services for which they were paying.

The reasons for this are many. Few people understand the complexities of health care reimbursement, because how hospitals establish what patients are charged is only abstractly related to actual cost. Hospitals record supplies and services rendered during a hospital stay, and charge according to a fee schedule, or "chargemaster." But these amounts rarely reflect what hospitals actually receive as payment. Medicare and Medicaid payments are set by the government, while third-payer insurance prices are negotiated yearly for significantly reduced rates.

"There is no standard in the United States for reasonable prices or reference pricing," said lead study author Dr. Renee Hsia, associate professor of emergency medicine at the University of California at San Francisco. "If you go to a hospital, they can charge you whatever they want. Negotiated rates are trade secrets," she said.

"I see these issues every day," she said. "Regardless of what they are coming in for, the bill is going to be huge. Even if we can take care of them physically, financially, it could be devastating."

And devastating it is for millions of Americans. In a 2007 study by Harvard Medical School and Ohio University researchers, 62.1 percent of bankruptcies were medically related. Most of these happened to well-educated Americans who owned their homes and were in middle-class occupations. Not all these families were struck by devastating cancer or incurable disease. Hsia's findings suggested that it was possible that even a routine procedure could produce a bill in the hundreds of thousands of dollars.

"No one is protected," Hsia said. "Even with insurance, it is a crazy and secret system"

Others working in the field suggested there was no simple solution.

"Consumer empowerment can only occur if prospective patients actually have easy access to user-friendly, reliable information," Princeton economist Uwe Reinhardt explained in his 2006 article, "The Pricing of U.S. Hospital Services: Chaos Behind a Veil of Secrecy."

In 2006, California started to require hospitals to publish average charges for common procedures. However, these charges were rarely posted on hospital websites, making the information difficult to obtain. Furthermore, published charges rarely reflect negotiated payments.

Meanwhile, numerous websites have popped up allowing consumers to search for the average prices of common medical procedures and services according to ZIP codes. And a select few hospitals and insurance companies have made treatment cost estimators available to help patents prepare for upcoming hospital bills.

Despite these efforts, not much has changed to help patients become informed consumers.